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Advisors and Credit Advice: Are We Burying Our Heads in the Sand?

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What You Need to Know

  • Researchers asked 500 financial professionals if they advise clients on credit issues and, if so, what types of advice they provide.
  • Despite the rise in advisory service, professional credit advice has been informal at best for most Americans.
  • Many advisors were prohibited or unsure of their ability to make housing credit recommendations.

When we think of financial planners providing “credit advice,” it brings us back in time to the image of a life insurance agent  or even the property and casualty agent  being asked to caution the clients’ children on the dangers of debt and credit cards.

Despite the rise in advisory service, professional credit advice has been informal at best for most Americans. Many retirees now carry debt, which has resulted in a significant increase in liabilities that put them at risk.

For example, the Urban Institute reports that some 9.18 million homeowners age 65 and older have mortgage debt, up nearly 60% from 5.82 million a decade ago. The Employee Benefit Research Institute reports that the percentage of families with heads age 75 or older with monthly debt obligations greater than 40% of their income increased by more than 23% from 2007 to 2016.

Considering how dangerous mandatory debt service can be to retirement accounts over a lengthy retirement subject to market volatility, where do credit conversations fit in the world of life insurance agents, registered representatives and investment advisor representatives?

Financial services professionals are trained, regulated on and compensated for placing products and managing assets. Advising clients about credit may not fit into the typical planning process. Do broker-dealers, insurance companies and investment advisors even encourage conversations about credit? Or have financial services ignored this pressing need?

Certifications may provide some insight. The Certified Financial Planner Board of Standards requires candidates to study principles of debt, cash flow management and retirement income and distribution strategies as part of the journey to CFP  certification.

 The Accredited Financial Counselor designation (AFC) dives deeper into consumer debt management, personal finance and spending. The American College of Financial Services’ ChFC designation, and other mainstream designations, also require an understanding of credit, mortgages, refinancing and cash flow strategies. With CFP, AFC, ChFC and other designations providing education on debt, tens of thousands of advisors are theoretically equipped to offer credit advice.

But do they? And if they are advising clients on credit decisions, are these conversations blessed or encouraged by compliance? Or is our profession looking the other way while attending to more lucrative areas?

What We Asked Advisors

The Academy for Home Equity in Financial Planning at the University of Illinois at Urbana-Champaign queried financial professionals regarding their relationship with client credit in 2020. More than 500 financial services professionals from a variety of backgrounds participated in a survey about personal and housing credit, including 143 CFP professionals.

When asked about personal credit and credit card recommendations, just over 30% of survey participants reported providing credit card management recommendations to clients. Even fewer, 12%, had provided clients with recommendations surrounding personal (non-student and non-collateralized) loans.

The survey then asked respondents what kind of mortgage credit advice they give. Options included:

  • Utilize a mortgage for the purchase of a residence.
  • Refinance housing debt using a residential mortgage.
  • Utilize a reverse mortgage for income or retirement sustainability.

Following up on housing debt recommendations, participants were asked about their regulatory environments:

  • My firm prohibits me from providing advice about home equity loans, mortgages or reverse mortgages.
  • I am unsure if my firm allows me to provide advice about mortgages, home equity loans or reverse mortgages.
  • My firm allows me to make mortgage and home equity loan recommendations to my clients, but not reverse mortgage recommendations.
  • I can provide advice about home equity loans, mortgages and reverse mortgages to clients.

The resulting answers shine a light on the intersection of professionals, the regulatory landscape and reality.

Roughly 35% of survey participants were prohibited or unsure of their ability to make housing credit recommendations. Yet 63% of this group did make mortgage, reverse mortgage or mortgage refinancing recommendations to clients anyway.

This inconsistency in advice in financial services relationships is concerning. How can our profession address client need without guiding debt decisions in a world where credit is easy to obtain and easy to overuse?

Next, the survey tested credit recommendation by business line. While RIA-affiliated professionals tend to make credit recommendations more often, broker-dealer-affiliated professionals are not far behind.

The poll’s results show that there are gaps in credit guidance, which are especially acute for those professionals who tend to be associated with a comprehensive approach to planning. The consumer cannot be sure he will receive the comprehensive advice he anticipates when engaging with a financial services professional.

Credit decisions throughout the employment years have a lasting impact on eventual retirement security. The profession is encouraged to adopt more robust policy, planning platforms, model language, continuing education and training to bring client expectations in line with actual advice.


Craig Lemoine, Ph.D, CFP, is an associate professor of financial planning at the University of Illinois at Urbana-Champaign. Shelley Giordano is the founder and past chair of the Academy for Home Equity in Financial Planning. Jamie Hopkins, Esq., LLM, CFP, ChFC, CLU, RICP,  is the managing partner of wealth solutions at Carson Group and a finance professor of practice at Creighton University Heider College of Business.